News + Events
Washington Energy Report - (1) Expanded Waxman-Markey Climate Bill Scheduled for House Floor Vote Today (2) Update on Transportation Legislation in the 111th Congress (3) FERC Accepts Southwest Power Pool’s Funding Proposal to Integrate Wind Resources (4) FERC Releases Assessment on State-by-State Demand Response Potential
Washington Energy Report
June 26, 2009
Expanded Waxman-Markey Climate Bill Scheduled for House Floor Vote Today
On Monday, House Democrats released a revised 1,200 page energy bill, clearing the way for a possible floor vote on HR 2454, The American Clean Energy and Security Act of 2009, as early as today. As of press time, the House voted to bring the bill to the floor by a vote of 217 to 205 but has just begun debate.
The legislation which would impose limits for the first time on carbon dioxide and other greenhouse gas pollution from, for example, power plants, factories and refineries, has faced major debate but has become a priority for the Obama Administration as President Obama and his aides have been pushing for votes all week.
On May 21, the House Energy Committee approved a 946-page version of the bill out on a final vote of 33 to 25 after four days of markup sessions where dozens of amendments were considered. The bill then was referred to eight other committees, including the House Ways and Means Committee and the House Science and Technology Committee. Yesterday, Waxman released a manager’s amendment that reflects additional deals reached among lawmakers.
The substitute amendment posted by the Rules Committee late Monday expands upon the version reported out of the Energy Committee by almost 300 pages. Among the changes made to the previous version, the substitute amendment provides states greater flexibility in using emissions allowances to support renewable energy and energy efficiency programs. The amendment reserves 0.5% of the allowances for tribal renewable energy programs and allows states to use up to 10% of their allowances for the nonfederal share of transportation programs that reduce greenhouse gas emissions, such as transit and bicycle facilities. The substitute amendment also makes technical changes to the definition for combined heat and power system savings, ensures that market transformation efforts will be included in measurement of electricity savings, and makes other minor technical changes.
The substitute amendment also reflects changes recommended by the other committees with jurisdiction over the bill. It provides rural electric cooperatives a free 0.5% portion of the emission allowances to be distributed through the cap and trade program. It also includes a provision that resolves another contentious issue for the agriculture industry by reflecting an agreement that the Department of Agriculture, and not the Environmental Protection Agency (“EPA”), would regulate farm and forestry offset projects.
In addition, the substitute amendment specifies that offsets will be allowed for destruction of chlorofluorocarbons (“CFCs”) if permitted by the EPA Administrator under Title VI of the Clean Air Act, and clarifies that offset approval petitions and decisions shall be available to the public. In addition, it provides a role for the Department of Energy and Indian tribes in the national strategy for carbon capture and sequestration, as well as transmission planning, and support for tribal renewable energy and energy efficiency programs. Other changes to the bill address building code language regarding “cool roofs,” technical changes to transportation efficiency sections, carbon market assurance, and exportation of clean technology, among others.
The full text of the bill may be found at the House Rules Committee’s web page: http://www.rules.house.gov/.
Update on Transportation Legislation in the 111th Congress
Congressional maneuvering during the past few weeks has dramatically altered the landscape for pending and proposed transportation legislation. Before June, legislation that would eliminate the nation’s freight railroads’ antitrust exemptions was moving swiftly through Congress as the Railroad Antitrust Enforcement Act of 2009 (introduced as S. 146 and H.R. 233). This Act would make railroad actions more susceptible to investigation by the Federal Trade Commission and the Department of Justice on antitrust and anti-competitive grounds. However, on the eve of the June 2nd cloture vote scheduled in the Senate that would have ended debate and led to a floor vote on S. 146, the bill was withdrawn from consideration. The reasoning for this action was an agreement reached between Senator Herb Kohl, the Chairman of the Antitrust Subcommittee of the Judiciary Committee and Senator Jay Rockefeller, the Chairman of the Committee on Commerce, Science and Transportation to allow the Railroad Antitrust Enforcement Act to be wrapped into a larger railroad competition bill being drafted by long-time captive shipper advocate Senator Rockefeller and others. The Rockefeller legislation is likely to focus on improving Surface Transportation Board rate challenge processes and correcting anticompetitive policies, such as providing more competitive options for railroad customers in “bottleneck” situations. Similar railroad competition legislation, termed “re-regulation” by the railroads, has failed many times in past Congressional sessions, but the climate has been most favorable this year. Nevertheless, many commentators feel that the delay coupled with issues and increased opposition from wrapping together of the Railroad Antitrust Enforcement Act with the competition legislation has slightly lessened the likelihood that any railroad legislation will be enacted in the limited remaining Congressional calendar this year.
On a broader perspective, new multi-year transportation appropriation legislation is up for passage this year. The current legislation, SAFETEA-LU, was passed in 2004 and expires September 30
, 2009. On June 17
th, Secretary of Transportation Ray LaHood announced that the Obama Administration would seek an 18-month extension of SAFETEA-LU, thus delaying consideration of any replacement legislation. The next day, James Oberstar, the Chairman of the House Committee on Transportation and Infrastructure, criticized the Adminstration’s extension plan and released a 100-page blueprint for the proposed Surface Transportation Authorization Act of 2009. Chairman Oberstar said that an extension would create too much uncertainty for states that need to make long-term infrastructure decisions. Conversely, Barbara Boxer, the Chair of the Senate Environment and Public Works Committee, has stated that she supports the 18-month extension. It is thought that the Obama Administration wants to avoid debate over a new multi-year transportation bill because it would require consideration of a funding source, such as the gasoline tax which was included in SAFETEA-LU. In any event, action of some sort will have to occur this summer because the Highway Trust Fund will run out of money by the end of this summer.
FERC Accepts Southwest Power Pool’s Funding Proposal to Integrate Wind Resources
On April 24, 2009, the Federal Energy Regulatory Commission (“Commission” or “FERC”) approved a wind transmission cost allocation proposal by the Southwest Power Pool, Inc. (“SPP”), designed to reduce barriers to integrating wind power in the region and thereby expand the availability of wind generation resources.
FERC’s Order updates SPP’s Open Access Transmission Tariff by making more of the costs associated with wind resources eligible for “base plan” funding. Base plan funding is SPP’s cost allocation methodology for certain network upgrades that are included in and constructed pursuant to the SPP transmission expansion plan in order to ensure the reliability of the transmission system.
SPP’s proposal generally increases base plan eligibility for network upgrade costs associated with wind resources. However, SPP also proposed a limitation that such network upgrades will qualify for base plan funding if the sum of a customer’s new and existing transmission capacity designated for wind does not exceed twenty percent of the customer’s projected system peak responsibility in the first year the customer plans to take service from the wind resource. FERC accepted the proposal, but gave SPP one year to evaluate the integration of wind generating facilities into the system and report the results to FERC to ensure that the limit will not unnecessarily impede wind resource development.
As a result, SPP will now allocate a greater percentage of network upgrade costs associated with wind resources to the entire region. FERC Chairman Jon Wellinghoff said that “our action today represents a significant step for SPP toward leveling the playing field for all generating resources. This plan also ensures that zones with substantial wind resources do not bear a disproportionate amount of the cost of network upgrades that are needed for those resources to serve loads in other zones.”
SPP is a FERC approved regional transmission organization that serves portions of Arkansas, Kansas, Louisiana, Missouri, Nebraska, New Mexico, Oklahoma, and Texas. The Commission’s order is available at: http://www.ferc.gov/whats-new/comm-meet/2009/
061809/E-3.pdf.
FERC Releases Assessment on State-by-State Demand Response Potential
On June 18, 2009, FERC released a national assessment detailing demand response potential with a state-by-state analysis. The report estimates that demand response potential can reduce peak electricity demand by 4% to 20%, which translates to between 38 gigawatts (“GW”) and 188 GW, by 2019. The report fulfills the first of three requirements of the Energy Independence and Security Act of 2007. Another requirement is the development by FERC of a National Action Plan on Demand Response due in June 2010.
FERC Chairman Jon Wellinghoff commented on the report saying, “It is important to emphasize that the analysis reflected in the Assessment is an estimation of potential, not projections of what is likely to occur. The estimates of potential therefore are not targets, goals or requirements…the estimates are intended to serve as reference for understanding the various pathways for pursuing increased levels of demand response.”
FERC Staff developed four scenarios to estimate the potential for demand response: Business-as-Usual, Expanded Business-as-Usual, Achievable Participation, and Full Participation, and applied them in 5- and 10-year horizons. Staff designed the scenarios to allow for a more transparent model and allow interested parties to input different assumptions and their own data into the model. The report provides estimates of demand response potential for different types of electric customers and an analysis of the incorporation of different technologies to achieve the estimated demand response potential.
The Business-as-Usual scenario is used to represent the base case. This approach estimates the demand response if existing and currently planned programs continued unchanged. Expanded Business-as-Usual uses the first scenario with (1) higher participation of demand response in all states, (2) partial deployment of advanced metering infrastructure, and (3) 5% customer participation in dynamic pricing. The Achievable Participation Scenario builds upon the previous scenarios with (1) universal deployment of advanced metering, (2) dynamic pricing being the default, and (3) demand response programs being available to customers not choosing dynamic pricing. The Full Participation Scenario assumes the universal deployment of advanced metering and dynamic pricing coupled with proven enabling technologies.
The report is the first to analyze the demand response potential for each individual state and the District of Columbia. It highlights the different challenges that each state and region face in delivering electric load and provides information to assist in evaluating demand response.
Chairman Wellinghoff believes that “reduction of these magnitudes has the potential to reduce the need to operate several hundred power plants during peak times.” In addition, Chairman Wellinghoff believes the demand reduction has the “potential” to assist in the balancing of the electrical grid and allow for development and integration of renewable energy into the grid.
The National Assessment of Demand Response Potential report is available at: http://www.ferc.gov/legal/staff-reports/06-09-demand-response.pdf.